From 2027, the European Union will launch the new Emissions Trading System for buildings and road transport (ETS2). To support the most vulnerable social groups, the EU has also established the Social Climate Fund (SCF), a financing tool for the period 2027–2032—amounting to at least €86.7 billion—through which member states can access resources to implement social and climate policies, such as direct income support, energy renovations, heat pumps, or clean transport programs.

This may have gone “under the radar,” but in July, the Greek government opened the Social Climate Plan (SCP) for public consultation. This is the country’s official plan, outlining the measures and policies to be funded with €4.78 billion from the SCF.

The plan includes positive proposals, such as energy renovations of homes, social housing programs, and green mobility initiatives. However, it also shows significant weaknesses and gaps that need immediate improvement to effectively meet the real needs of society.

Perhaps the most critical shortcoming, highlighted in The Green Tank’s study in collaboration with Facets, is that Greece could actually mobilize up to three times more resources by fully utilizing additional revenues from the carbon market (ETS1 and ETS2). In total, up to €15.5 billion could be directed during 2027–2032 toward long-term decarbonization measures for buildings and road transport, while simultaneously supporting the most vulnerable households.

Climate crisis and the need for action: what is ETS2

Reducing emissions is no longer just a climate obligation—it is a matter of social cohesion and economic sustainability. The European Union has adopted the Emissions Trading System (ETS) as a key climate policy tool. Its effectiveness is most evident in electricity and heat production, where from 2005—when the system started—until 2024, emissions in the EU fell by 54%, and in Greece by 70.4%, mainly due to the reduction of lignite use.

In recognition of this success, the 2023 revision of the directive created ETS2, which will apply from 2027 to buildings and road transport. Fossil fuel suppliers will pay a carbon tax, which will ultimately be passed on to consumers, leading to higher prices for oil, gas, and other conventional fuels.

The Greek reality

Greece is particularly exposed. Transport accounts for about 35% of total CO₂ emissions, while electricity use in the residential sector covers only 36%. At the same time, 25% of households are considered energy vulnerable, and about 14% suffer from transport poverty. Without compensatory measures, ETS2 could further burden the most vulnerable.

According to our study, the direct socio-economic impacts of ETS2 on vulnerable populations will range between €833 million and €1.6 billion during 2027–2032 (assuming average emission allowance prices of €45/tCO₂ and €84/tCO₂, respectively), increasing the number of vulnerable households by approximately 0.9–1.5% in terms of energy vulnerability and 1.1–2.1% in terms of transport vulnerability.

The Greek government’s Social Climate Plan

As mentioned, the SCF has a total budget of €86.7 billion, of which Greece is entitled to €4.78 billion. In its Social Climate Plan, Greece presented its national strategy for using these resources, with measures to reduce emissions and support vulnerable populations. While the plan moves in the right direction, it has two major weaknesses. First, it ignores additional revenues from ETS1 and ETS2, which together with the SCF’s €4.78 billion could reach up to €15.5 billion. Second, the plan remains unclear on implementation details: who the beneficiaries are, the timeline, and the costing of measures.

What €15.5 billion could fund

As our study shows, by fully utilizing the resources, Greece could effectively support 538,000–630,000 households during 2027–2032, providing direct income support as well as permanent solutions for reducing dependence on fossil fuels.

Specifically, in buildings, a combination of energy renovations, heat pumps, and photovoltaics (on rooftops or via energy communities) could eliminate energy vulnerability if designed with geographic and social criteria in mind. In transport, strengthening public transport with discounts or free tickets for vulnerable households, developing infrastructure, and supporting electric vehicle leasing in areas highly dependent on private cars could reduce transport poverty. Meanwhile, the cost of direct support would not exceed 29.7% of the resources, below the 37.5% limit set by the SCF.

The measures proposed in The Green Tank and Facets study to mitigate the impacts of ETS2 are strengthened by the additional available revenues from ETS1 and ETS2, which, combined with the SCF, maximize the social benefit.

From burden to opportunity

ETS2 is expected to play a decisive role in reducing household dependence on fossil fuels. While it initially carries risks of social and economic burden, fully leveraging the available resources—which could reach up to €15.5 billion—and implementing targeted measures can substantially reduce energy and transport vulnerability. This opportunity is strategically significant: it can determine not only the success of climate policy but also place social justice at the center of the transition.

Notes

In an article on Climatebook.gr, Ioanna Souka analyzes the new EU carbon tax (ETS2) set to apply from 2027 to heating and road transport.

Greece currently has €4.78 billion from the Social Climate Fund, but by fully leveraging additional revenues from ETS1 and ETS2—up to €15.5 billion—it can support hundreds of thousands of households, reduce energy and transport vulnerability, and advance a just green transition.

Read the full article in Greek as published on September 4, 2025, on Climatebook.gr, here.